When Uber recently announced a partnership with fintech firm Pipe to offer capital to its restaurant partners, it wasn’t just a new feature. It was the latest and most prominent signal of a seismic shift in small business lending, a multi-trillion-dollar market historically dominated by traditional banks.
What is Embedded Finance for Small Businesses?
The trend, known as embedded finance, is rapidly turning the platforms that small and medium-sized businesses use for daily operations, from processing payments to managing deliveries, into a source of capital. By leveraging a treasure trove of real-time sales data, companies like Uber, Shopify and Square are offering faster, more accessible funding that bypasses the cumbersome processes of legacy financial institutions. This shift is not just challenging the definition of a lender; it is redefining the relationship between platforms and the businesses they serve.
Data-Driven Lending: A Faster Alternative to Bank Loans
For decades, getting a small business loan has been a notoriously slow and frustrating ordeal. Banks require extensive paperwork, from historical tax returns to detailed business plans, and heavily weigh personal credit scores and collateral. The process can take weeks, even months, with no guarantee of approval. For a restaurant owner needing to replace a broken oven or an e-commerce merchant needing to buy inventory for the holidays, that delay can be devastating.
For more like this on Forbes, check out Why Banks Are Embracing Embedded Finance To Stay Competitive.
How Uber And Fintechs Are Changing Small Business Lending
The Uber and Pipe partnership exemplifies the new model. Capital offers are embedded directly into the Uber Eats Manager app, the digital dashboard restaurants already use to track orders and analytics. Instead of relying on credit scores, Pipe’s AI-driven engine underwrites offers based on the restaurant’s sales history on the Uber Eats platform.
The results are transformative. Approval decisions are nearly instant, with funds often arriving in a business bank account within 24 hours. There are no credit checks and no personal guarantees required. This innovative approach to funding relies on a structure known as a Merchant Cash Advance. Instead of a traditional loan with a varying interest rate, an MCA involves a clear, fixed fee agreed upon upfront, providing transparency and predictability. Repayment isn’t a fixed monthly installment; it’s a flexible percentage of the restaurant’s ongoing sales, automatically deducted from their payouts. When business is slow, payments are smaller, aligning the cost of capital directly with the merchant’s revenue.
“We’re empowering restaurant owners to grow their own way without the burdens of traditional financing,” said Karl Hebert, Vice President of Global Commerce and Financial Services at Uber.
For more like this on Forbes, check out The Responsible Use Of AI In Retail And Finance.
Shopify and Square: The Pioneers of Platform Lending
While the Uber deal is new, the competitive landscape is already well-established. E-commerce giant Shopify has provided over $5.1 billion in financing to its merchants since 2016. Square, the point-of-sale powerhouse, has extended over $24.5 billion in funds globally. DoorDash, Uber’s chief rival in food delivery, offers a similar merchant cash advance product through a partnership with the fintech Parafin.
Why Tech Platforms Are Becoming the New Lenders
These platforms aren’t just adding a service; they are creating powerful, self-reinforcing ecosystems. By providing essential capital, they increase their value to merchants, reduce churn and build a competitive moat that standalone rivals and traditional banks struggle to penetrate. A restaurant that gets a loan through Uber is more likely to use that money to expand its business, driving more orders, and more revenue, through the Uber platform.
The Future of SMB Capital: A Global Trend
The future of this trend lies abroad. The International Finance Corporation estimates a staggering $5.2 trillion annual financing gap for small businesses in developing countries, a void that data-driven platform lending is uniquely positioned to fill. Shopify has already expanded its capital services to Canada, the United Kingdom and Australia, with more markets likely to follow as the model proves its efficacy.
As this new financial infrastructure grows, it is forcing a reckoning for all players. Small business owners are now presented with a powerful new choice, one that prioritizes speed and integration with their daily workflow. For traditional banks, the message is stark: innovate and partner, or risk becoming obsolete in the new ecosystem where the best bank may not be a bank at all.